General Motors said on Wednesday that its net income fell due to slow sales and low inventory in the second quarter, particularly due to profitable pickups and SUVs after eight weeks of plant closure due to a coronavirus pandemic.
GM, the first of Detroit’s three automakers to release second-quarter numbers, announced about $ 800 million. USD net loss, ie 132% less than at the same time a year ago. Its profit before adjusted interest and taxes was $ 500 million. USD loss and decreased 118%. Net income fell 53% to $ 16.8 billion, but GM’s Chinese property income was $ 200 million for the quarter.
The most striking was the burning of cash during the quarter. GM has spent $ 8 billion on cars in cash.
But in an interview with the media, GM CFO Dhivya Suryadevara said the second half of the year would be better and it should allow GM to pay the $ 16 billion revolving credit line it needed earlier this year to survive the pandemic.
“We expect to be able to generate $ 7-9 billion in cash in the second half of the year. We burned down in the first half of the year and money generation in the second half of the year, so we expect to pay for the revolver by stockpiling cash, ”said Suryadevara. “But it depends on a steady market recovery.”
GM ended the quarter with $ 30.6 billion in car cash.
“We have the experience to make decisions quickly and strategically that will ensure long-term success for the benefit of all stakeholders,” said Mary Barra, GM’s CEO. “We will continue to make the necessary changes throughout the company to enable growth as we prepare to deliver a world free of accidents, emissions and congestion. ”
Ford Motor will release earnings on Thursday and Fiat Chrysler on Friday.
Rough years so far
In North America, GM said it lost $ 100 million in adjusted earnings before interest and taxes, up from $ 300 million a year ago, and GM GM says it is “right about the breakthrough.”
“Clearly, the second quarter was a challenge, but we achieved near-opaque EBIT in North America, despite losing 8 of 13 weeks of production,” said Dhivya Suryadevara, GM’s chief financial officer. “These results illustrate the resilience and power to earn a business when we make the critical investments needed for our future.”
GM sales in the U.S. fell 34% to 488,876 vehicles sold during the quarter. According to Cox Automotive, GM’s market share in the US was 16.85%, compared to 16.97%.
But the Cox report said Chevrolet and GMC could have sold more trucks if they had more stock. “GMx truck inventories were very low during the pandemic,” Cox Automotive wrote in a report.
However, in 2020 In the second half, when GM will increase production of the most profitable trucks that can generate particularly high margins in the Nordic countries, Emmanuel Rosner, an automotive and automotive technology analyst at Deutsche Bank in the United States, said in a statement.
GM’s results exceeded Wall Street expectations. Analysts polled by FactSet predict GM’s consensus will report a $ 2.9 billion loss in the quarter.
The car industry has had a difficult year. In the last quarter, GM withdrew its 2020 Recommendations and halted stock buys and quarterly dividends, saving $ 2 billion. GM also announced that employee salaries could be deferred and reduced. He increased his debt to $ 30 billion to hold his war chest.
“There is no doubt that the car dealers were hit hard in the second quarter, but the proactive balance sheet action allowed these companies to take a significant impact on the closure without damaging them,” wrote David Kudla, chief investment strategist at Mainstay Capital Management. Tuesday’s study note. “It’s not just a testament to previous lessons, but a solid leadership of the company.”
There are bright spots. Kudla said GM’s sales in China fell 5.3% in the second quarter, an improvement from 43% in the first quarter.
· In addition, · there are new product launches, including all Hummer electric pickups, the Cadillac Lyric and the new Bolt SUV. GM has promised at least 20 new EV products by 2023.
More: General Motors’ net income for the first quarter was $ 294 million. USD – down 87%
Cash is still reigning
Keeping GM in cash is more important than ever as it seeks to rebuild vehicle inventories and recoup lost profits, analysts say.
GM said it plans to spend between $ 7 billion and $ 9 billion a quarter, but that estimate was based on April. In the US, monthly sales fell from 8 million to 10 million units. The industry grew again in May and June, but that did little to help the car, which landed right in the middle.
“The challenge will be to keep the factories open due to a lack of both parts, absenteeism or a re-obligation by states to close due to soaring cases,” Morningstar analyst David Whiston told a free press on Tuesday. “Pace can help solve some of these problems, but a virus can become an uncontrollable thing to manage if it gets worse.”
Aggressive cuts in GM costs over the past two years, including shutters and cuts in white-collar work, have helped the company have a good chance of being pushed out of the rough market. GM is still struggling until 2020. Save $ 6 billion from your cost-cutting measures.
April Suryadevara told investors that GM had also “significantly reduced” its advertising, deferral of compensation and “certain employee problems”. Suryadevara said GM’s current cash costs would be about $ 2 billion a month, including taxes, interest and pensions.
More: GM suspends dividends and takes other steps to accumulate cash during a pandemic
During the quarter, GM spent more on its cars for sale. Cox Automotive said GM’s incentive costs rose nearly 17% to an average of $ 5,817 per vehicle. However, its average transaction price rose only 1% to $ 42,795.
Data from Cox Automotive show that GM’s luxury brand, Cadillac, was the only brand to cut incentives. Cadillac spent 12% less than a year ago, but still spent an average of $ 8,119 per vehicle.
“Selling vehicles in the quarter cost almost every carmaker more money,” Michelle Krebs, an analyst at Cox Automotive, told Free Press. “The most incentive incentives; especially to keep sales from falling through the floor, very efficient 0% 84-month financing was provided for domestic use.”
Cox Automotive surveys have shown that consumers were reluctant to buy and postponed purchases. But great deals would make them buy. However, automakers, including GM, do not need to maintain the pace of incentives due to tight stocks, Krebs said.
“We have seen cars give up incentives as stocks have fallen,” Krebs said. “As a result, prices are rising, and car dealers and sellers are selling better prices than before at vehicle sales prices, albeit lower, because demand has outstripped supply.”
Despite GM’s sales down 21.4% to 1,110,824 units in the first half of the year, Kudla said the Chevrolet Blazer SUV, which was introduced last year, was a great place to go, with sales up 68% over the quarter.
Assembly lines are wrapped
Kudla said the next quarter will focus on replenishing merchants ’stocks to meet consumer needs.
“To complete the replenishment, GM will need to have three shifts running to major plants, such as the Wentzville Assembly plant, which produces GM mid-size trucks,” Kudla said. “It can prove difficult during a pandemic.”
The closure of U.S. factories in the Detroit Troika began in late March as the spread of the pandemic severely affected inventory levels. They start reopening the plants in mid-May, but in places where the pandemic continues to spread, GM is experiencing a high number of absences.
As the First Press first reported, the problem prompted GM to say earlier this month that it would stop the third shift at GM’s Wentzville Assembly plant near St. Louis.
Due to the spread of coronavirus in the environment, there were not many plants. However, GM and the local union agreed to hire temporary workers and relocate the laid-off workers from other locations so that the plant would operate in all three shifts.
More: GM’s decision to keep the main truck plant running due to fears of coronavirus
More: GM Ventvilians Assembly plant layoffs – 1,250 employees
Analysts say it is critical that GM maintains all of its plants at full capacity to rebuild inventories.
“Due to last year’s strike, GM stocks have plunged little into the pandemic, so the plants need to stay open,” Whiston said. “GM only earns revenue from wholesale agencies, so if they don’t produce, they don’t make money.”
And while GM ended the second quarter with a 74-day supply of stocks that sounds rich, don’t be fooled, Krebs said.
“It masks the severity of inventory problems,” Krebs said. “GMC and Chevrolet, GM’s most profitable vehicles, have the lowest inventories, especially for pickups.”
Contact Jamie L. LaReau at 313-222-2149 or firstname.lastname@example.org. Follow her on Twitter @jlareauan. Read more General motors and sign up for our autos newsletter.
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